Although United States companies may lower expectations of their operations in China next year, they still remain optimistic in the long term, according to a survey by the American Chamber of Commerce.

Nearly 50 percent of respondents surveyed by AmCham said they were optimistic about the outlook of their China business next year. The figure, however, was down from 79 percent who were surveyed last year about their business hopes for this year. Companies are also slowing their expansion to second and third-tier cities in China, compared to the number in the previous year. The survey also showed more than 70 percent of companies aren't likely or don't have plan to invest in new cities such as Chengdu in Sichuan Province or Dalian in Liaoning Province.

However, more than 80 percent of respondents were optimistic about the long-term business prospects for China in the next five years.

The AmCham released the 2008 China Business Report yesterday in Shanghai, which showed this year was basically a good year for American companies in China. A total of 78 percent of companies surveyed forecast an increase in revenue for this year, and 40 percent of them had a rise of more than 20 percent. More than two-thirds of respondents consider China among the top three places for global investment, with 17 percent saying the country is the No. 1 destination.

"American companies in China showed increasing activity, and the number of US companies importing into the China market nearly doubled from that of 2006," said J. Norwell Coquillard, chairman of AmCham Shanghai.

Major challenges for US firms include human resource constraints and inconsistencies in rules and tax administration. Margins for US firms in China continue to tighten this year on higher salaries and surging material prices. Moreover, 30 percent of respondents felt rising costs are causing China to lose some competitive advantages, more than doubled from the 13 percent who felt that way in the year-earlier period.

(Shanghai Daily December 18, 2008)